Western Union agreed on Thursday to forfeit $586m after admitting that it violated US anti-money laundering laws by ignoring evidence that thousands of its agents were involved in sending illicit cash to criminals, including human traffickers in China and bookies in Costa Rica, the US Department of Justice announced.
From 2004 to 2012, Western Union, a global money services business based in Englewood, Colorado, “processed hundreds of thousands of transactions” that were part of global fraud schemes, the DoJ said.
The company has agreed to a deferred prosecution deal with the DoJ and a related settlement with the Federal Trade Commission. Western Union admitted to criminal violations including failure to maintain an effective anti-money laundering programme and aiding and abetting wire fraud. The company’s share price dropped 3.3 per cent on the news.
“As this case shows, wiring money can be the fastest way to send it — directly into the pockets of criminals and scam artists,” said David Bitkower, acting assistant attorney-general.
Prosecutors said that criminals contacted American victims — many of them elderly — and promised lottery winnings, discounted goods or job offers, or posed as family members in need of financial assistance. The crooks told victims to wire funds through Western Union, and participating agents entered false names or addresses into the payment system to conceal the criminals’ identities.
“Various Western Union agents were complicit in these fraud schemes, often processing the fraud payments for the fraudsters in return for a cut of the fraud proceeds,” the DoJ said.
The company failed to ensure that its agents complied with a federal law that requires financial institutions to notify authorities of transfers exceeding $10,000. Instead, Western Union, which operates in more than 200 countries, looked the other way as its agents in the US, UK and Spain repeatedly transferred sums that fell just below that figure.
“Various Western Union agents were complicit in these fraud schemes, often processing the fraud payments for the fraudsters in return for a cut of the fraud proceeds
Half of the $310m that one Western Union agent in Los Angeles sent to China over a five-year period “was illegally structured and transmitted using false identification”, said Deirdre Fike, assistant director in charge of the Federal Bureau of Investigation’s Los Angeles Field Office.
Much of the money was sent by illegal Chinese immigrants to pay off their human smugglers, the DoJ said.
Chief Richard Weber, a criminal investigator with the Internal Revenue Service, said the company showed “blatant disregard” for its anti-money laundering responsibilities.
Starting in 2004, the company began receiving complaints from customers who had been duped into wiring money. Its internal security department recommended automatically suspending any agent that wired 15 suspect payments within 120 days, a policy that “could have prevented significant fraud losses to victims” and would have led to more than 2,000 agents being suspended or fired, the government said.
One Western Union agent in Peru accumulated 294 consumer fraud reports in a nine-month period.
But the company failed to act and instead even acquired an agent that it knew had an ineffective anti-money laundering programme and had done business “with other agents that were facilitating significant levels of consumer fraud”, the government said.
When one Pennsylvania customer tried to report a scam, a Western Union employee told her that she was “wasting [her] time” because “there are thousands of these complaints laying on the desk and nothing gets done”, court documents said.
This is not the first time that Western Union has had such problems. In 2005, the company entered into an agreement with the attorneys-general in 47 states and the District of Columbia to resolve their investigations of fraudulent transactions. But promised reforms failed to materialise, the DoJ said.
Since the latest problems came to light in 2012, Western Union has created a new “fraud risk management” unit, beefed up its anti-fraud technology and more than doubled its compliance staff, according to court documents.
“We worked hard to put these investigations behind us,” said Bill Chandler, the company’s chief communications officer.
Western Union now must implement reforms, including punishing agents who violate anti-money laundering regulations, and surrender $586m to refund victims. An independent compliance auditor will monitor its conduct for the next three years.
Thursday’s announcement also resolves a previously undisclosed investigation by the Treasury department’s Financial Crimes Enforcement Network, the company said.
Western Union said it anticipated taking a charge of about $570m in its 2016 fourth quarter to cover the settlement costs, fees for the compliance monitor and related matters.